SES S.A. has announced its financial results for the three months ending 31 March 2019 with revenue and EBITDA in line with company expectations and SES on track to deliver on its 2019 financial outlook. Continued focus on execution has delivered major wins in the Networks business which is soon to be enhanced with the addition of four new O3b satellites, successfully launched at the beginning of April 2019.
Key business highlights showed a group revenue of EUR 480.6 million for Q1 2019 (-2.3% at constant FX compared with the prior period). The video underlying revenue of EUR 303.3 million was 7.3% lower (year-on-year) at constant FX due to lower video distribution revenue (-8.1%), including in the North American wholesale business, while video services was down (-4.5%) compared with the same period last year due to the non-renewals of low margin, ‘legacy’ services in MX1. Networks’ underlying revenue grew by 5.4% (year-on-year) at constant FX to EUR 170.6 million driven by growth in Government (+9.6%) and Mobility (+8.7%) while Fixed Data (-1.3%) was slightly lower than Q1 2018. EBITDA of EUR 290.1 million (down 7.0% at constant FX) represented an EBITDA margin of 60.4%, or 62.1% excluding a restructuring charge of EUR 8.3 million associated with the group’s ongoing optimisation initiatives. Net profit attributable to SES shareholders was EUR 72.2 million compared with EUR 98.2 million in Q1 2018 with the variance mainly driven by the combination of a lower EBTIDA and higher depreciation and amortisation. Free Cash Flow before financing was EUR 84.3 million, including a 31.7% (year-on-year) reduction in investing activities. Net debt to EBITDA ratio (per the rating agency methodology) was 3.40 times at Q1 2019 (Q1 2018: 3.41 times) and is expected to be at or below 3.3 times at the end of 2019, in line with SES’ commitment to investment grade status. SES’s fully protected contract backlog at 31 March 2019 was EUR 6.7 billion (gross backlog of EUR 7.3 billion when including backlog subject to contractual break clauses).
Steve Collar, President and CEO, commented: “We have made a solid start to 2019 with our Q1 results fully in line with our expectations. We have delivered another good quarter in our Networks business, building on an outstanding year of double-digit growth in 2018. Strong focus on cost control, along with the ongoing flattening and reshaping of our organisation around our customers, is yielding positive results.
“Our recent customer success with Ritz-Carlton, our managed services expertise for unmanned civilian aviation with EMSA and our cloud-enabling capabilities with Resolute Mining create unique value to our customers and sustain growth. In addition, the recent entry into service of SES-12 over Asia-Pacific and the announcement of a significant anchor customer in Indonesia with Teleglobal will help us to continue to outperform the market and to deliver on our 2019 outlook. We look forward to the entry into service in early Q3 of the four additional O3b satellites recently launched, completing the original constellation and paving the way for O3b mPOWER in 2021.
“Notwithstanding challenging market conditions in Video, SES’ reach continued to grow and we now deliver prime video content to over 355 million households or one billion people across our video neighbourhoods around the world. The recent deals we signed with Discovery, Nordic Entertainment Group and Crown Media highlight our approach to partner with the biggest broadcasters to deliver the best services and viewing experiences anywhere to any device. In addition, we continued to expand our international footprint with new partnerships such as Benin and our growing technical reach in Africa, Asia Pacific and Latin America.
“In parallel, SES and its CBA partners continued to work closely with the FCC, content owners, cable operators and other engaged stakeholders to deliver a transparent, fair and agile adoption of 5G in the United States.”
SES’ transformation continued in Q1 of 2019 with certain organisational changes, flattening layers within the organisation, bringing together all Technology and IT functions under common leadership and forming a Global Services team to drive customer service and success across SES. Finance and other support functions were also realigned to optimally support the business. In Q1 2019, SES began bringing together the SES video infrastructure business with MX1, which will enhance the value of SES’ service capabilities to our core video customers. This will be completed by Q3 2019.
The financial outlook, as presented in February 2019, is unchanged with 2019 group revenue of EUR 1,975 – 2,040 million and 2019 group EBITDA of EUR 1,220 – 1,265 million (excluding a restructuring charge of EUR 25 – 30 million expected to be recognised in 2019 as noted above). Expected capital expenditure (representing the net cash absorbed by the group’s investing activities excluding acquisitions and financial investments) also remains unchanged for the period 2019 to 2023 with EUR 450 million planned in 2019.